WORLD TRADE  
ORGANIZATION  TN/RL/GEN/126 
24 April 2006 
 (06-1885) 
Negotiating Group on Rules Original:   English 
  
 
PROPOSALS ON THE PROHIBITION OF ZEROING 
 
Communication from Japan
 
  
 The following communication, dated 20 April 2006,  is being circulated at the request of the 
Delegation of Japan.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(06)/ 109), also be circulated as a formal document. 
 
_______________ 
 
  This paper aims to clarify the prohibiti on on zeroing, taking into account the useful 
discussions at the Rules Group meetings.
1  Part I of this paper provides further explanations on the 
principles underlying the prohibition of zeroing.  Part  II provides revised legal drafts relating to this 
issue,2 based on earlier proposals submitted by Members.3  
 
I. EXPLANATION  
 Below, we explain several important points regarding the prohibition of zeroing.  §These 
points relate to the draft legal text in Part II.   
1.  Prohibition of Zeroing as a generally-established principle 
 The WTO Appellate Body (“AB”) has confirme d repeatedly that “dumping is defined in 
relation to a product as a whole” and that, “while an  investigating authority may choose to undertake 
multiple comparisons or multiple averaging at an in termediate stage to establish margins of dumping, 
it is only on the basis of aggregating all these ‘intermediate values’ that an investigating authority can 
establish margins of dumping for the product under investigation as a whole.”4  
 Article 2.1 of the AD Agreement, which set s forth the definition of dumping, applies  
throughout the AD Agreement5.  The basic principle of the prohibition of zeroing therefore applies to 
all determinations of dumpi ng and margins of dumping.  This is tr ue both in original investigations 
                                                      
 1 This proposal does not prejudge the position of Japan in any dispute settlement proceedings. 
 2 We reserve the right to propose additional legal draft proposals relating to other aspects of the 
application of the prohibition of zeroing in the context of the AD Agreement. 
 3 TN/RL/GEN/8 and TN/RL/GEN/44. 
  4 United States – Laws, Regulations and Methodologies for calculating Dumping (“US-Zeroing”) W/T 
DS 294 AB/R (18 April 2006), para. 126. 
 5 US-Zeroing , para. 125. TN/RL/GEN/126 
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  and in subsequent proceedings, and regardless of the methodology used in calculating the margins of 
dumping.   
2. “Fair Comparison” between normal value  and export prices with regard to all 
comparable export transactions  
 As stated above, an anti-dumping investiga tion shall determine whether a product from a 
given exporter/producer under investigation as a w hole has been dumped in the importing market, not 
whether individual sales of that product or models of  that product have been sold below normal value.  
Also, a fair comparison must be made between norma l value and export prices. However, by "zeroing" 
negative results of multiple comparis ons, authorities fail to take fully into account the entirety of the 
prices of some export transactions.  That inflates the margin of dumping.  In addition, as the AB found 
in US – CRS Sunset Review , zeroing could, in some instances, turn a negative margin of dumping into 
a positive margin of dumping.  There is therefor e an inherent bias in the zeroing methodology.
6  
Although the basic principle (prohibition of zeroing) is already embodied in the current AD Agreement, there seem to be Members which have di fferent views on this princi ple.  Thus, we believe 
it is useful to clarify the basic principle in Article 2.4. 
 
3.  T-T comparisons must be subject to the same disciplines as W-W comparisons.  
 The current text of the AD Agreement clear ly prohibits zeroing in the calculation of the 
dumping margin in W-W comparisons in original inv estigations.  The AB has confirmed this in the 
following significant cases:  EC – Bed Linen,  US – CRS Sunset Review, US –Softwood Lumber, and 
US – Zeroing
7. 
 As discussed above, zeroing is prohibited as a general principle, regardless of the type of 
comparison methodology.  For the purpose of establishing the existence of the margin of dumping, W-W and T-T comparisons have no functional differen ce.  Indeed, if an authority “zeroes” in W-W or 
T-T comparisons, it fails to take fully into account the entirety of the prices of some export transactions, 
namely, those export transactions with  negative comparison results.  Th is practice inflat es the margin of 
dumping. Since zeroing could even turn a nega tive margin of dumping into a positive margin of 
dumping, it is an inherently biased practice.  If zeroing were prohibited in a W-W comparison but not in a T-T comparison, the two methodologies could produce substantially different results under 
otherwise identical conditions.  This would be an  absurd result, since a choice of a different 
methodology could easily turn a negative dumping margin into a positive one.   
 Since it is clear from the above that the current AD Agreement prohibits zeroing in T-T 
comparisons as well as in W-W comparisons, we believe no textual clarification is needed on this 
issue, and we do not propose any changes to the cu rrent text of the AD Agreement to that effect. 
                                                     
 
 6 US – CRS Sunset Review, para. 135  
  7 The Appellate Body Report, European Communities – Anti-dumping Duties on Imports of Cotton-
Type Bed Linen from India , WT/DS141/AB/R (1 March 2001), The Appellate Body Report, United States – 
Sunset Review of Anti-dumping Duties on Corrosion Resistant Steel Flat Products from Japan  (US – CRS 
Sunset Review) , WT/DS244/AB/R (15 December 2003),  United States – Final Dumping Determination on 
Softwood Lumber from Canada , WT/DS264/AB/R (11 August 2004); US  – Zeroing, W/T DS 294  AB/R (18 
April 2006).  TN/RL/GEN/126 
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  4.  Prohibition of Zeroing in subsequent proceedings 
(1) Article 9.3 Reviews 
Article 9.3 review proceedings involve a calculation of the margin of dumping.  Therefore, 
the same substantive disciplines on the dumping marg in calculation as in original investigations 
should apply in these reviews.  As discussed above, the prohibition of zeroing is a general principle 
for the calculation of the margin of dumping.  We see no reason why this general principle should 
apply to the calculation of the margin of dumping in  original investigations, but not in subsequent 
proceedings. 
Article 9.3.1 reviews have two functions: dete rmining the definitive level of duties, and 
establishing the cash deposit rates for the subsequent period. 
o The cash deposit rate calculated in an Artic le 9.3.1 review and the dumping margin 
calculated in an original investigation unde r the retrospective system have the same 
function.  Both of them establish the amount of security applicable to imports in the 
subsequent period.  
o The determination of definitive level of du ties in an Article 9.3.1 review and the 
dumping margin calculation in an origin al investigation  in a prospective ad valorem  
system have the same function.  Both establish the upper limit of liability for anti-
dumping duties specific to each exporter or foreign producer.8   
Since Article 9.3.1 reviews and original inves tigations share these two functions,  we see no 
logical reason why zeroing is allowed in the form er proceeding while prohibited in the latter. 
If zeroing is prohibited only in original investig ations but not in subsequent proceedings, the 
result would be fundamentally unfair, particularly  in a retrospective duty assessment system, where 
the original investigation determines only the depos it rate, and the upper limits to the definitive duties 
are determined in Article 9.3.1 proceedings.  Sp ecifically, while a margin of dumping, which is 
calculated in the original investigation based on prices and volumes of export transactions during the 
period of investigation without zeroing, only serves as the rate of deposits for future entries, the 
margin of dumping calculated in the duty assessment  phase under Article 9.3.1 for such entries could 
substantially increase, as a result of zeroing, even if the prices and volumes of such entries and the 
normal value were exactly the same as those in the original investigation.  Since, unlike in a 
prospective ad valorem  system where the calculated dumping margin without zeroing sets the upper 
limit of an importer’s final liability of anti-dumpi ng duties, a retrospective duty assessment system 
can charge a higher duty rate than the deposit rate , those entries could easily  face a higher duty rate 
only because of zeroing.  This would be an absurd result; the exporters and importers face substantial 
uncertainty, and this would undermine the prohibition of zeroing in the original investigation.   
As the AB confirmed in US – Zeroing , the margin of dumping esta blished for an exporter or 
foreign producer operates as a  ceiling   for the total amount of anti-dumping duties that can be levied 
on the entries of the subject product (from that exporter) covered by the duty assessment proceeding. 9  
If zeroing is permitted in Article 9.3 reviews, the authorities systematically disregard part of the 
transactions.  That would be contrary to the very  function that the antidumping duty is supposed to 
                                                      
  8 If the lesser duty rule is applied, the upper limit of  an importer’s final liability will be the lesser of the 
dumping margin and the injury margin (TN/RL/GEN/99).  For the sake of simplicity, this paper puts this issue 
aside for the moment. 
 9 US –Zeroing , para. 130-133 . TN/RL/GEN/126 
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  serve: to be imposed “to the extent necessary to coun teract dumping” that can be only determined for 
the product as a whole.
10  
The rationale to support the prohibition of zeroi ng in Article 9.3.1 proceedings applies with 
equal force to the dumping margin calculation in th e refund proceedings under Article 9.3.2.  Article 
9.3.2 proceedings establish the entitlement of an impo rter to a refund of any excess duties paid.  Here 
again, the function of the calculation and determin ation of the margin of dumping in the refund 
proceeding is the same as that in an original inves tigation: to establish the upper limit of an importer’s 
liability for anti-dumping duties.  Thus, the same  substantive disciplines on the dumping margin 
calculation applicable to original investigations (e .g. prohibition of zeroing) must apply to the refund 
proceedings as well. 
(2) Article 9.5 Reviews 
In addition, there is no reason why the substa ntive rules for determining the margin of 
dumping in an original investigation do not apply to new shipper reviews under Article 9.5.  Such 
reviews are merely substitutes for an original inv estigation for producers and exporters that had not 
exported during the period of the original investiga tion.  Thus, the prohibition of zeroing should apply 
in Article 9.5 reviews. 
(3)  Article 11 Reviews 
Finally, where the authorities conduct review s under Article 11 and when they make a 
determination of the margin of dumping during th e period of review, there is no reason why such 
reviews are not governed by disciplines of dumping margin calculation under Article 2, because the 
definition of “dumping” as containe d in Article 2.1 applies to the entire AD Agreement.  Thus, the 
prohibition of zeroing should also a pply in reviews under Article 11.  
(4) Conclusion 
 In sum, we believe that the logic is compelling that zeroing be prohibited in the calculation of 
the dumping margin in both original investigations  and in subsequent proceedings.  However, there 
seem to be some Members which have different view s, due to different ways of reading the current 
                                                      
 10 Some Members have contended that the term “m argin of dumping” in duty assessment proceedings 
can be interpreted as applying on a transaction-specific basis and that the determination of the margin of 
dumping under Article 9.3 proceedings would have to be made on an importer-specific basis because the duty must be levied on the importers.  The Appellate Body re jected this contention.  This contention confuses the 
practical aspects of levying the antidumping duty with the basic rules for determining dumping and margins of 
dumping.  These two issues are related but distinct issues. 
 The margins of dumping under Article 9.3 must also be determined on an exporter/producer-specific 
basis. Article 6.10 clarifies that margins of dumping must be determined on an individual exporter/producer 
basis.  This basic rule informs Article 2, which ther efore requires that dumping and the margins of dumping 
must be determined on an exporter/producer specific basis, and this rule applies both to original investigations 
and to reviews. As the Appellate Body has confirmed, “[e]stablishing margins of dumping for exporters or 
foreign producers is consistent with the notion of dumping, which is designed to counteract the foreign producer’s or exporter’s pricing behavior” and “it is the e xporter, not the importer, that engages in practices that 
result in situations of dumping
 (US –Zeroing , para. 129).   
Although the AD Agreement is clear on how authorities must calculate dumping margins, the 
Agreement is silent on how the authorities should levy th e amount of these margins of dumping on the imports.   
So long as the margin of dumping is calculated for th e product as a whole for a given exporter/ producer on a 
basis of entire prices of all export transactions of the product in question and the total amount of anti-dumping duties that are levied does not exceed the exporters’ or foreign producers’ margins of dumping, it is up to the 
authority to decide how to assess  the final duty liability among the parties that imported from the exporter.   TN/RL/GEN/126 
 Page 5 
 
 
  language of Article 2.4.2.  Hence, we believe that it is  useful to clarify this point in the text of Article 
2.4.2, without prejudice to the overarching definition of “dumping” under Article 2.1. 
5. The same margin calculation methodology shall normally be consistently used in 
original investigations and in Article 9.3 reviews  
The authorities should apply the same methodology, in principle, consistently in determining 
the margin of dumping in original inve stigations and Article 9.3 proceedings.11  If the authority can 
arbitrarily change its dumping margin calculation methodology between an orig inal investigation and 
subsequent Article 9.3 reviews, exporte rs would have little predictability.   
This rule would not impose a rigid discipline on  authorities, nor would it be a total prohibition 
on changing methodologies after the investigation.  Rather, the authorities would be able to change 
their methodologies whenever a change in the factual situation justifies a change.  For example, even 
when W-W comparisons were used in the original investigation, T-T comparisons can be chosen by 
the authorities in subsequent Article 9 reviews, on the ground that there are very few sales during the 
period of review. 
We note that this principle applies to the c hoice of all calculation methodologies in Article 
2.4.2, including the weighted average to transac tion (“W-T”) methodology in the second sentence of 
Article 2.4.2. 
6.  Single margin of dumping for the entire period of investigation or review  
Authorities could circumvent the prohibition of zer oing if they were allowed to subdivide the 
period of investigation or review, and calculate separate margins for each of the subdivisions (e.g. 
month, quarter, semi-annual).  This should not be allowed.  Indeed, the Appellate Body confirmed 
that the period of investigation “form[s] the b asis for an objective and unbiased determination by the 
investigating authority.”12  If an authority calculates separate  margins for subdivided periods within 
the period of review/investigation, and does not offset positive margins from one subdivision with 
negative margins from other subdivisions, this woul d have the same effect as zeroing. Authorities 
may not make an affirmative dumping determination regarding an exporter or producer that has no 
margin of dumping for the period of review/investig ation as a whole, regardless of whether the export 
price during a portion of the period was less than the normal value.  
 We believe that the period of investigation or  review must normally be one year.  This is 
because a shorter period of investigation cannot no rmally reflect adequately the exporter’s overall 
business, and may “be subject to market fluctuatio ns or other vagaries that may distort a proper 
evaluation.”13 
7.  There must be clear and adequate disciplines on W-T comparisons  
As stated above, there is a clear principle that  authorities must calculate a single margin of 
dumping without zeroing for the product as whole for the entire period of investigation or period of 
review.  However, we acknowledge the arguments of  some Members that, in certain circumstances, 
the ordinary margin calculation methodology might  not properly reflect the exporter’s business 
practices and the consequent injurious effect  of the exporter’s sales below normal value. 
                                                      
 11 Please see TN/RL/GEN/44, proposal 1. 
 12 The Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron 
Tube or Pipe Fittings from Brazil  (WT/DS219/AB/R) adopted 18 August 2003, para. 80. 
 13 Ibid. TN/RL/GEN/126 
Page 6  
 
  The second sentence of Article 2.4.2 sets forth the circumstances where authorities may use W-
T comparisons.  Authorities may do so if they  “find a pattern of export prices which differ 
significantly among different purchasers, regions or time  periods, and if an explanation is provided as 
to why such  differences cannot be taken into account appropriately by the use of a weighted 
average-to-weighted average or tran saction-to-transaction comparison.”   
We are open to discuss further how the marg in of dumping may be calculated in such a 
comparison.     TN/RL/GEN/126 
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II. PROPOSALS  
2.4 (first sentence)   A fair comparison shall be made between the export price and the normal 
value on the basis of differences between the expor t price and the normal value with regard to 
all comparable export transactions during a pe riod of time which shall normally be one year . 
 2.4.2  (first sentence)   Subject to the provisions  governing fair comparison in paragraph 4, the 
existence of margins of dumping during the investigation phase
 shall normally be established on 
the basis of a comparison of a weighted average normal value with a weighted average of prices 
of all comparable export transactions or by a comparison of normal value and export prices on a 
transaction-to-transaction basis. 
(No textual proposals regarding the second senten ce of Article 2.4.2 at this juncture.) 
  9.x   The provisions of Article 2 shall apply to all determinations pursuan t to paragraphs 3 and 5 
of this Article.  The authorities shall normally  use the same methodologies consistently in 
determining a margin of dumping in an investig ation initiated pursuant to Article 5, and in 
subsequent determinations pur suant to paragraph 3. If the authorities use a different 
methodology in subsequent determinations pursuan t to paragraph 3, the parties concerned shall 
be provided with an opportunity to make comment s, and a full explanation shall be given why 
such different methodology was used.   
 
11.x   If the authorities calculate the margin of dumping in any review under this Article, such 
margin of dumping shall be calculated in accordance with the provisions of Article 2.  
 
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